Is student loan debt threatening our economic recovery?

The average American with student debt now owes more than $25,000, while the total student loan debt has crossed the $1 trillion threshold, according to Rohit Chopra, student loan ombudsman for the newly formed Consumer Financial Protection Bureau (CFPB).

The $1 trillion number, which Chopra says was probably reached several months ago, includes both private debt and debt for the federal student loan program and exceeds the debt for both credit cards and auto loans.

"Unlike other consumer credit products, student debt keeps growing at a steady clip," Chopra said at a conference hosted by the Consumer Bankers Association on March 21. "Students borrowed $117 billion in just federal student loans last year. And students continue to borrow private student loans, which lack the income-based repayment and deferment options of federal student loans. If current trends continue, there will be consequences not just for young people, but for all of us."

Among the factors responsible for the rising student debt are increased education costs, low levels of employment, and rising prices for household goods. With jobs hard to find, some students have returned to school, further adding to their debt. Meanwhile, interest rates for federal student loans known as Stafford loans are due to rise from 3.4 percent to 6.8 percent on July 1.

According to Chopra, the excessive levels of student debt could slow economic recovery in the housing market, as borrowers are forced to pay off their loans rather than become home buyers.

"This could very well be the next debt bomb for the U.S. economy," William Brewer, president of the National Association of Consumer Bankruptcy Attorneys, told the Associated Press. "We're seeing huge defaults on student loans and people driven into financial difficulties because of them." Under current law, student loans are not affected when an individual files for bankruptcy protection.

The debt is not just affecting people in their 20s and 30s. The Federal Reserve Bank of New York also found that Americans age 60 and older still owe $36 billion in student debt. Their report, which cites lower numbers for the total debt than those calculated by the CFPB, found that 5.3 percent of the 37 million current student loan borrowers were age 60 or older.

According to analysis by the website Policymic.com, tuition at public universities has risen almost 130 percent in the past 20 years, but costs are not always the top consideration when high school students are applying to colleges. At the same time, the students do not comprehend how difficult it will be to pay off their student debt. The site also blamed misleading advertisements and incentives from private lenders and a lack of promotion for alternatives to costly education, such as tuition reimbursement stipends from groups like AmeriCorps.